Toys R Us will leave a big hole, say Texas toy makers

Robotic bugs by Greenville-based Hexbug made their debut in Toys R Us stores almost 10 years ago and become immediate collectibles.

Ned Frost, 43, and son Julian Frost, 4, play with a train set while shopping inside The Toy Maven store at the Preston Royal Shopping Center in Dallas, Friday afternoon, March 16, 2018. (Ben Torres / Special Contributor)

The liquidation of Toys R Us will leave big holes in nostalgic hearts and shopping centers, but the 70-year-old retailer is also leaving toy companies without a big-box retailer devoted exclusively to the $27 billion U.S. toy business.

“This rattles everybody’s nerves; even if Toys R Us hasn’t been a significant part of your own business lately, it’s been the standard-bearer of the toy business for a long time,” said Stephen Gibson, marketing manager of Tek Nek, a Colleyville company that makes new versions of classic toys.

Dallas-area toy companies said getting into the aisles of the Wayne, N.J.-based retailer was always a stamp of approval, but they’ve been adapting and thriving as the industry watched the decline of the biggest specialty toy store, which had been saddled with leveraged buyout debt.

Toys R Us said Thursday that it’s preparing to close 735 U.S. stores including 59 in Texas. There’s a chance that its 200 top-performing U.S. stores could be saved if a seller is found to combine them with its “stable and profitable” 82-store business in Canada. A Toys R Us spokeswoman declined to identify the profitable U.S. stores.

Toys R Us helped so many toy companies get to scale, Gibson said. Until the early 2000s, it was the biggest customer for Tek Nek, a family-run company which makes Rockin’ Rider, stick, spring and rocking play horses. Tek Nek still sells on toysrus.com, but its biggest customers now are Amazon, Wayfair, Buy Buy Baby, Bass Pro Shops and Cabela’s.

Robotic bugs by Greenville-based Hexbug made their debut in Toys R Us stores almost 10 years ago and become immediate collectibles. Hexbug is now a $100 million-a-year brand.

“Toys R Us helped put us on the map nearly 10 years ago with the launch of HEXBUG nano, and will always be a part of our growth story,” said Tony Norman, president and co-founder.

Hexbug became a recognized brand at Toys R Us and other retailers know that customers will track it down where ever it’s sold, Norman said. He’s seeing increased demand from other big-box stores and from craft and hobby retailers who are diversifying their mix with toys.

Cautious suppliers

Beaver Raymond, co-founder of Dallas-based Marshmallow Fun Co., the maker of Marshmallow Blasters, said Toys R Us is in his company’s top 10 list of retailers, but not at the top.

“We’ve been careful not to extend ourselves with Toys R Us, and little guys like us can roll with the punches, unlike Hasbro and Spin Master,” Raymond said.

"We were offered an exclusive by Toys R Us for 100,000 units," Houdashell said. While that would have been a $1 million sale for a startup, they declined the offer, instead going with smaller specialty stores and Amazon. The new Texas toy company leases warehouse space in Dallas from Marshmallow Fun and is about to sell out of 250,000 units it planned to make this year, he said. Eggmazing, which Houdashell and McGill first took to market only in 2016, is now in 1,200 stores in the U.S. and Canada. The founders were also on Shark Tank in February.

“But I’m a Toys R Us kid. It was always a staple for me growing up, and now I hate to see them go away,” Houdashell said.

Even competitors feel that way.

Candace Williams, founder of The Toy Maven, said it’s not good for the industry as a whole as Amazon continues to gain more power in every merchandise category.

But she’s hoping that the level of service that her employees offer will keep her brick-and-mortar store business healthy.

Williams wants customers to bring their children to play with the train tables and other displays as a neighborhood stop on a Saturday afternoon. When families are looking for a board game, she said, her staff is trained to help them find the right choice.

The lines dwindled outside Toys R Us on recent Thanksgiving Day and Black Friday openings. In 2012, shoppers waited in line to take advantage of Black Friday specials at the Toys"R"Us on North Central Expressway in Dallas.(Stan Olszewski / Staff Photographer)

Looking to the future

The Toy Maven has two stores and may try to fill the void left by the closure of 20 Toys R Us and Babies R Us stores in the Dallas-Fort Worth area.

Williams’ two stores are in Preston Royal Shopping Center in Dallas and in Southlake next to Central Market, and she’s considering opening a third next year in the Plano-Frisco area.

She is worried about more power heading to Amazon, Walmart and Target. “There could be a race to the bottom," she said. "Price wars aren’t good for anybody.”

“Amazon, Walmart and Target are clear winners, possibly along with friendly local toy and game stores,” said Tim Barrett, senior retailing analyst at Euromonitor. However, over the next year, he’ll be watching whether the release of the Toys R Us inventory on the market depresses toy sales for other retailers.

Walmart and Target have both built up their toy aisles over the past decade, making it a bigger year-round business for them. Plano-based J.C. Penney and Minnesota-based Best Buy have been expanding their toy business. Penney opened year-round toy shops in all its stores in July 2017 and added key brands such as Lego and Barbie. Now more toy brands are approaching Penney, said spokeswoman Sarah Holland, since the toy departments the store opened last year performed well over Christmas.

And from a retailer’s perspective, at least it’s far from Christmas, when about 40 percent of toys are sold. But third-party sellers who sell on Amazon and eBay, for example, could take advantage of Toys R Us going-out-of-business sales to undercut those who try to abide by the industry’s minimum advertised price, or MAP, policy, Barrett said.

When Sports Authority went out of business last year, there was a flurry of concern from brands not wanting to see their merchandise dumped on the market, said Pamela Springer, CEO of Oris Intelligence, an Ohio-based firm that works with manufacturers to monitor and enforce prices of their goods online.

“Sports Authority worked with the brands; it will be interesting to see what happens,” she said. “It only takes one small seller to cut the price of something online and then there’s a domino effect.”